Contractors’ Questions: Can I claim my flights to the client site as a business expense?
Contractor’s Question: I need to know what HMRC expenses rules say about flight travel for a single limited company director operating outside IR35.
I’ve landed a home-based role but it requires two upcoming visits to the Middle East to visit the client and help with implementation. I’ve personally paid for two BA flights already, but want to know if I can put these through my company and reimburse the cost to myself? I didn’t claim any accommodation or subsistence costs. I don't want to get into a P11d situation and have to pay National Insurance. Thanks for any advice!
Expert’s Answer: Let’s breakdown this question into a few parts. Firstly. . .
Can you claim your flight travel through your limited company?
In short, the answer is yes.
Like with any company, whether you are a permanent employee or a limited company contractor, if you are required to travel to places outside of your standard place of work, you can claim the travel expenses incurred back through the business.
The reason we say, ‘outside your standard place of work’ is because should your contract state that you are “required to be on site 2-3 days a week,” then the commute for this would be considered your ‘usual place of work,’ and therefore the travel costs could not be expensed.
In your situation, you are required to fly abroad to aid in a task for your job. It’s a ‘temporary workplace’, which you would not be travelling to under your normal contract, so you can therefore claim this back.
Can you be reimbursed for the flights already purchased?
Yes. And it is worth noting that your accommodation and subsistence – which you mention -- should also be eligible for reimbursement too -- if it was recent, so we’d recommend you seeking professional advice.
To claim tax relief on the travel required, you can either make the payment personally, as you have done, and then expense this through the company. Alternatively, moving forward, you can pay through your company bank account. Remember, all travel must be logged in your bookkeeping. We recommend doing this as soon as possible for good practice, and absolutely within the required tax year - and be supported with full proof of receipt for the travel and detail on dates of travel and if extended, why.
Should the end-client decide to pay for the travel through their company, this is exempt from your company books and you have nothing to declare.
Again, always refer to your contract to ensure the terms of your contract clearly state your place of work and requirements.
Avoiding any tax issues
It’s quite simple if you want to avoid NI bills. Crucially, if what you are trying to claim back is not "wholly, exclusively and necessary” for the running of your business, then you can not claim this through the business.
Always be aware, HMRC will likely challenge any expenses that appear a bit ‘too good to be true’. This means. . .
- No personal travel claims – so no adding your family or friends onto your flights!
- Avoid declaring any ‘lucrative’ business claims – for example, an excessively luxurious hotel should NOT be listed as the ‘necessary’ accommodation.
- Following the 24-month rule – should you spend 40% of your time, or more, at your ‘temporary workplace’ then you will be UNABLE to claim any travel or subsistence. This will then be classed as your usual place of work and travel can no longer be expensed.
When you do travel for your business, make sure to keep receipts for any of the following – any without receipts will be null and void:
- Car Mileage (for the first 10,000 miles you can claim 45p per mile).
- Flights, bus and rail.
- Car parking.
- Tolls and congestion charges.
- Car hire (you can only claim full expenses on cars hired for less than 45 days).
- Meal allowance (also known as ‘subsistence’).
- Incidentals (you can claim £10 for un-receipted incidentals per night overseas and £5 when working in the UK).
These will all contribute towards lowering your corporation tax. Such expenses are one of the key benefits when running your own freelance contracting business. Good luck!
The expert was Christian Hickmott, chief executive of contractor accountancy firm Integro Accounting.